Cosmos Insurance Public : 2023 – Solvency & Financial Condition Report (SFCR)

About this update from Cosmos Insurance Public Co. Ltd.

SFCR 2023 Solvency and Financial Condition Report 2023 COSMOS INSURANCE COMPANY PUBLIC LTD HEAD OFFICE: 46 Griva Digeni Avenue, 1080 Nicosia P.O.Box 21770, 1513 Nicosia T: +357 22 796 000 | F: +357 22 022 000 Solvency and Financial Condition Report for the year ended 31 st December 2023 Table of Contents Executive Summary 3 A. Business Performance 7 A.1 Business 7 A.2 Underwriting performance 11 A.3 Investment Performance 13 B. System of Governance 17 B.1 General information on the system of governance 17 B.2 Fit and proper requirements 23 B.3 Risk management system including the own risk and solvency assessment 25 B.4 Own Risk and Solvency Assessment (ORSA) 32 B.5 Internal control system 34 B.6 Internal Audit Function 35 B.7 Actuarial Function 36 B.8 Outsourcing 37 B.9 Adequacy of the system of governance 40 B.10 Any other information 40 C. Risk Profile 41 C.1 Underwriting Risk 42 C.2 Market risk 47 C.3 Counterparty Default Risk 53 C.4 Liquidity risk 56 C.5 Operational risk 59 C.6 Other material risks 61 D. Valuation for solvency purposes 63 D.1 Assets 63 D.2 Technical provisions 67 D.3 Other liabilities 72 E. Capital Management 75 E.1 Own Funds 75 E.2 Compliance with the MCR and SCR 80 F. Appendices 82 Appendix A: Cosmos Organisational Structure 82 Appendix B: Extracts from Annual QRTs 83 Appendix C: Abbreviations 94 Appendix D: Auditors Report 95 COSMOS INSURANCE COMPANY PUBLIC LTD HEAD OFFICE Page 2 of 95 46. Griva Digeni Avenue, 1080 Nicosia P.O. Box 21770, 1513 Nicosia T: +357 22 796000 | F: +357 22 022000 Solvency and Financial Condition Report for the year ended 31 st December 2023 Executive Summary Purpose of the report The purpose of the Solvency and Financial Condition Report ("SFCR") is to satisfy the public disclosure requirements according to Article 304 (1) of the Delegated Regulation (EU) 2015/35. The Report discloses the information referred to in Articles 292 to 298 of this Regulation under the following main headings: business performance, system of governance, risk profile, valuation for solvency purposes and capital management. The present SFCR has been prepared with reference date 31 st December 2023 and has been approved by the Company's Board of Directors on 28 th March 2024. Overview of the Company Cosmos Insurance Company Public Limited (hereinafter "Cosmos") was established in Cyprus on October 17, 1981 as a Private Limited Liability Company and on December 6, 1999 the Company became listed in the Cyprus Stock Exchange Market. Cosmos operates island-wide through its large network of insurance intermediaries and through its offices in Nicosia, Larnaca, Limassol and Paphos. The Company employs sixty-six well-trained individuals and maintains cooperation with more than one hundred and twenty-five (125) insurance intermediaries throughout the island. The Company maintains a loyal network of insurance agents and clients. Service standards and claim settlement have remained intact and Cosmos enjoys a very good reputation in the market. Cosmos insurance revenue of 2023 surpassed €19,5mil. Motor insurance is the Company's biggest line of business followed by the Medical Expense and the Fire and other damage to property lines of business. On 1 January 2016, the Company transitioned into the Solvency II regulatory framework after completing a comprehensive program of regulatory requirements in corporate governance, risk assessment and management, solvency and reserving as well as supervisory and public disclosure. COSMOS INSURANCE COMPANY PUBLIC LTD HEAD OFFICE Page 3 of 95 46. Griva Digeni Avenue, 1080 Nicosia P.O. Box 21770, 1513 Nicosia T: +357 22 796000 | F: +357 22 022000 Solvency and Financial Condition Report for the year ended 31 st December 2023 Business and Performance The Company's main lines of business ("LoBs") are Motor (Third Party Liability and Own Damage), Medical Expense, Fire and other damage to property and General Liability. The Company's net insurance and financial result for 2023 amounted to €2,5m profit as follows: Financial Result split per LoB MOTOR FIRE OTHER A&H LIABILITY TOTAL Amounts in EUR (€) Insurance revenue 12.604.642 2.503.372 270.349 2.915.302 1.216.866 19.510.531 Insurance service (10.715.011) (972.475) (321.250) (2.237.397) (442.303) (14.688.436) expense Net expense from reinsurance (1.025.023) (822.327) 112.247 (564.040) (351.201) (2.650.344) contracts held Insurance service 864.608 708.570 61.346 113.865 423.362 2.171.751 result Total investment 424.407 84.290 9.103 98.160 40.973 656.933 income Insurance finance expenses for (371.737) (5.441) (2.777) (1.575) (21.645) (403.175) insurance contracts issued Reinsurance finance income for 55.871 4.213 1.845 1.058 10.870 73.857 reinsurance contracts held Underwriting Result 973.149 791.632 69.517 211.508 453.560 2.499.366 Table 1: Underwriting Results 2023 per LoB Overall, Company's insurance revenue was approximately €19,5m in 2023, recording a small increase of 0,53% or €103k compared to 2022. During 2023, Cosmos experienced an increase of insurance revenue, across all lines of business except General Liability. Company has implemented increases in its premium calculation model in the Motor line of business effective from 1 st June 2023, in response to the higher costs observed recently due to the rising inflation in both vehicle repairs and other expenses. On the other hand, Company's efforts to penetrate in other profitable line of business such as Fire and other damage to property resulted in a notable increase of its share, taken into consideration, the aggressive approach from Bank-affiliated insurance companies. Moreover, Company's expenses increased compared to prior year, mainly due to the deterioration of loss ratios in Motor and Medical lines of business. The Business performance of the Company is further analysed in Section A of this report. COSMOS INSURANCE COMPANY PUBLIC LTD HEAD OFFICE Page 4 of 95 46. Griva Digeni Avenue, 1080 Nicosia P.O. Box 21770, 1513 Nicosia T: +357 22 796000 | F: +357 22 022000 Solvency and Financial Condition Report for the year ended 31 st December 2023 IV. System of Governance The corporate governance framework of the Company is based on the "Three Lines of Defence" model which supports the implementation of a robust internal control system and is aligned with the "four eye principle" that the Company is required to comply with. Moreover, the Company has established the following functions to ensure effective oversight of its operations, in accordance with the requirements of Solvency II for an Internal Control System: Risk Management Function; Compliance Function; Internal Audit Function; and Actuarial Function. The Company ensures that all persons who effectively manage the Company or have other key functions are fit to provide sound and prudent management through their professional qualifications, knowledge and experience and are proper by being of good repute and integrity. The Company has also defined its own risk management system and performs an Own Risk and Solvency Assessment ("ORSA") at least once a year. The System of governance of the Company is further analysed in Section B of this report. Risk Profile The Company uses the standard formula to estimate its Solvency Capital Requirement ("SCR") according to which the SCR calculation is divided into risk modules. The components of the SCR (before diversification) for the reporting year ended 31 December 2023 together with their allocation of SCR are presented below: Health Operational Risk 6,36% Underwriting risks 1,43% Counterparty risk 13,57% Non-Life Underwriting risks 52,65% Market Risk 25,98% Figure 1: Cosmos SCR Components as at 31/12/2023 COSMOS INSURANCE COMPANY PUBLIC LTD HEAD OFFICE Page 5 of 95 46. Griva Digeni Avenue, 1080 Nicosia P.O. Box 21770, 1513 Nicosia T: +357 22 796000 | F: +357 22 022000 Solvency and Financial Condition Report for the year ended 31 st December 2023 The main components of Company's SCR are Non-Life Underwriting risk, Market risk and Counterparty Default risk. Non-life underwriting risk is comprised from Premium & Reserve risk, Lapse risk and Catastrophe risk, which are mitigated mainly through the purchase of reinsurance cover. SCR from Market risk is relatively high and is substantially driven due to the large portfolio of properties and the significant exposure of the Company in Property risk. The Risk profile of the Company is further analysed in Section C of this report. VI. Valuation for solvency purposes The valuation of assets and liabilities for Solvency II purposes is in line with the Company's financial statements prepared under International Financial Reporting Standards ("IFRS") except for: Differences in the valuation of technical provisions and associated reinsurance recoverables; Intangibles recognised as asset under IFRS but valued at zero under Solvency II; Differences in the valuation of Deferred tax assets/liabilities; Difference in the valuation of Insurance receivables. The Company does not apply any matching and volatility adjustments nor any transitional measures for the valuation of technical provisions. The valuation for solvency purposes of the Company is further analysed in Section D of this report. VII. Capital Management The Company's SCR as at 31 December 2023 was estimated at €6,96m compared to Own Funds of €11,243m, resulting in a SCR coverage ratio 161,68%. In accordance with Solvency II Directives, all insurance entities, at any given time must have adequate available capital to meet the Minimum Capital Requirement ("MCR") to retain its license and operate in the Cyprus insurance market. Company's MCR as at 31 December 2023 as determined by Solvency II was determined at €4m, which indicates that the Company can cover its minimum capital requirement by approximately 2,81 times. The Capital management of the Company is further analysed in Section E of this report. COSMOS INSURANCE COMPANY PUBLIC LTD HEAD OFFICE Page 6 of 95 46. Griva Digeni Avenue, 1080 Nicosia P.O. Box 21770, 1513 Nicosia T: +357 22 796000 | F: +357 22 022000 Solvency and Financial Condition Report for the year ended 31 st December 2023 A. Business Performance A.1 Business A.1.1 Name and legal form of undertaking Cosmos Insurance Company Public Limited (hereinafter "Cosmos") was established in Cyprus on October 17, 1981 as a Private Limited Liability Company and on December 6, 1999 the Company became listed in the Cyprus Stock Exchange. Its registered address is 46 Griva Digeni Avenue, 1080 Nicosia, Cyprus. A.1.2 Supervisory authority The Company is authorised and regulated by the Superintendent of Insurance. The Superintendent of Insurance is the competent authority of the insurance sector in the Republic of Cyprus and exercises all the powers granted by the Law on Insurance and Reinsurance Services and Other Related Issues of 2016 [Law 38(I) 2016] and by the relevant Regulations, for the purpose of protecting the policyholders and the insurance beneficiaries. Contact Information: Address: P.O. Box 23364, 1682 Nicosia Telephone Number: +35722602990 Fax Number: +35722302938 E-mail: [email protected] A.1.3 External Auditors The Company's external auditors are PricewaterhouseCoopers Limited. Contact Information: Address: PwC Central, 43 Demostheni Severi Avenue, CY-1080 Nicosia, Cyprus Telephone Number: +35722555000 Fax Number: +35722555001 A.1.4 Holders of qualifying holdings in the undertaking Cosmos is a Company listed in the Cyprus Stock Exchange. Its main shareholders are: Major shareholders % of share capital Kyriakos M. Tyllis and Co Ltd 40,98 Kyriakos Tyllis 18,81 Charalambos Panayiotou 9,74 Elias Mavromatis 9,74 COSMOS INSURANCE COMPANY PUBLIC LTD HEAD OFFICE Page 7 of 95 46. Griva Digeni Avenue, 1080 Nicosia P.O. Box 21770, 1513 Nicosia T: +357 22 796000 | F: +357 22 022000 Solvency and Financial Condition Report for the year ended 31 st December 2023 A.1.5 Material lines of business and material geographical areas where the Company carries on business The Company carries out business in Cyprus under the following non-life insurance lines of business: Financial statements ("IFRS") Abbrevation Solvency II Accident and Health A&H Medical Expense, Income protection Motor Motor Motor vehicle liability, Other motor Other Marine Marine, aviation and transport Miscellaneous Miscellaneous financial loss Fire Fire Fire and other damage to property Liability Liability General liability Table 2: Cosmos Lines of Business (LoB) Cosmos has a wide distribution network in Cyprus which is monitored through its head office in Nicosia and branch offices situated in Limassol, Paphos and Larnaca. The Company's network of insurance agents is located throughout Cyprus and provides a very personalized level of service to their customers. A.1.6 Any significant business or other events that have occurred over the reporting period that have had a material impact on the undertaking Macroeconomy & Geopolitical landscape The geopolitical conflicts of the region, from the ongoing Russia - Ukraine war which commenced in early 2022, to the most recent Israel - Hamas war and the Yemen crisis caused by Huthi in late 2023, all of which are still in development as at the time of preparation of this report, create widespread uncertainty. Cosmos does not have a direct exposure to any of the above-mentioned regions. Nonetheless, the instability caused by the conflicts inadvertently impacts the global economy. Furthermore, due to Cyprus' geographical position, in the middle of these areas, it is expected that businesses with activities or investments in the war zones are affected significantly. Furthermore, the sanctions in financial transactions imposed by the US and the EU against Russia, in response to the Russian-Ukrainian war, continue to be updated and have impacted businesses across Cyprus with Russian interests or clientele. Cosmos' management and BoD review and discuss any new developments and are prepared to adjust the Company's strategy or take action to mitigate the Company's probable exposure, if deemed necessary. COSMOS INSURANCE COMPANY PUBLIC LTD HEAD OFFICE Page 8 of 95 46. Griva Digeni Avenue, 1080 Nicosia P.O. Box 21770, 1513 Nicosia T: +357 22 796000 | F: +357 22 022000 Solvency and Financial Condition Report for the year ended 31 st December 2023 Climate change & Earthquake risk The natural disasters in 2023 resulted in above-average economic losses, especially in the Mediterranean-Middle East region. The earthquake sequence that hit Turkey and Syria in early February 2023, was followed by the Emilia-Romagna Floods in May and a hailstorm of enormous proportions in July - both in Italy, as well as the wildfires in North Greece (Evros) and Cyclone Daniel, which caused a biblical catastrophe in the region of Thessaly, Greece, both in August 2023. Climate change consequences have become more and more apparent, particularly on physical risk exposures (frequency and severity), as the natural disasters of 2023 showcased. On a global scale, 2023 has been reported as the warmest year on record, and the largest in terms of deaths caused by natural disaster related since 2010 (estimated at 95.000 human lives lost). Cyprus has reported an increased number of extreme weather events in recent years; none of which, however, had catastrophic proportions. At the same time, it is expected that as the frequency of these events increases, the materiality of their impact will inadvertently deteriorate. The severe economic losses sustained by the (re)insurance market, have caused a hardening of the reinsurance market conditions, especially under the catastrophe (CAT) programmes. Cosmos has adjusted the budget of the year 2024, to reflect both the increase in frequency of the CAT events, as well as the hardening of the reinsurance market conditions. Regulatory updates: IFRS17 implementation The Company in 2023 complied with the provisions and requirements of the new accounting standard for insurance contracts IFRS17, which has been effective since January 1 st , 2023. Cosmos has gone through a thorough implementation and transition phase, which included the engagement of experienced external advisors and advancements to the in-house software systems. As a publicly listed company, Cosmos has successfully published its interim financial statements under the new requirements in mid-2023 and its audited Annual Financial Statements for the year on 28 March 2024. Given that Cosmos is a non-life insurance company with no exposure to long term business, all Company portfolios are measured under the simplified method i.e. Premium Allocation Approach (PAA). Even though, the concepts of the PAA measurement model do not materially differ to those of the IFRS4 standard, the transition to IFRS17, has triggered the establishment of new studies and the reassessment of the methodologies employed in determining the actuarial provisions. The Solvency II Balance Sheet and solvency position of the COSMOS INSURANCE COMPANY PUBLIC LTD HEAD OFFICE Page 9 of 95 46. Griva Digeni Avenue, 1080 Nicosia P.O. Box 21770, 1513 Nicosia T: +357 22 796000 | F: +357 22 022000 Solvency and Financial Condition Report for the year ended 31 st December 2023 Company however, remain immune to any changes in the statutory reporting regulation, with minor movements possibly stemming from the deferred tax assets or liabilities; thus the results presented in the AQRTs and the present SFCR Report, are not affected by the transition. Product Development Cosmos' strategic plan includes the development of its Non-Motor portfolio with innovative products that service the clients' current and future needs. In order to meet this goal, in late 2023, the Company created the position of a Business Development Manager, who among others, acts as Project Manager in any product development process. Furthermore in 2023, Cosmos launched petCARE, a new Pet Insurance product (falling under the Miscellaneous Financial loss portfolio), replacing its existing Pet insurance plan with more covers and extensions. In late 2023, Cosmos finalised its officeCARE plan, a completely new package insurance plan which will be launched officially in April 2024, an innovative product compared to what the market currently offers and includes a number of office business-related covers. Digital transformation and strategy Cosmos aims to be a pioneer among the Cyprus insurance market in using technology in its day-to-day operations and has a range of in-house software systems which are believed to be valuable tools for both the personnel and the network of intermediaries collaborating with the Company. Cosmos Online, an online portal for both customers and intermediaries launched in 2022, was further updated in 2023 to include automisations, which aim to: be user friendly; reduce time and bureaucracy in processes for both the intermediaries and the customers of Cosmos; reduce printing; reduce the Company's exposure to operational risk; and gather more data in respect of a risk, in order to build a data-driven underwriting strategy. Furthermore, Cosmos has decided to transition to a full electronic claim folder environment by 2025 and in late 2023 started to design the development a Claim Processing system, with automations that allow the claim handlers to perform their duties faster and more effectively, with reduced operational risk exposure and zero printing required. In early 2024, Cosmos is in the process of engaging a third-party provider to execute this project. COSMOS INSURANCE COMPANY PUBLIC LTD HEAD OFFICE Page 10 of 95 46. Griva Digeni Avenue, 1080 Nicosia P.O. Box 21770, 1513 Nicosia T: +357 22 796000 | F: +357 22 022000

View stock analysis, news, and events for Cosmos Insurance Public Co. Ltd.